Life Income Gifts
Willamette University offers many life-income arrangements that, in exchange for your gift, pay income for life or for a fixed time period.
Life-income gifts offer many benefits
- Income payments for life to you and/or other beneficiaries you choose
- Reduction or elimination of capital gains tax on gifts of appreciated property
- Increased income
- Current income tax deduction
- Diversification of investments
- Professional investment management
- Reduction of your taxable estate
- Fulfillment of supporting Willamette during your lifetime
Generally, any property suitable for an outright gift to the University can be used to establish a life-income arrangement.
Fixed-Income Arrangements
Charitable Gift Annuities.
With a charitable gift annuity, you receive a fixed rate of return for life, typically at rates much higher than rates offered by banks or other fixed-income investment vehicles. The rate of return generally varies depending on your age at the time of the gift. A portion of the income you receive is tax-free. You can establish a charitable gift annuity with a minimum gift of $5,000. You can choose a deferred charitable gift annuity, where the start of income payments is deferred, and you receive a higher rate of return in exchange for the deferral.
| Age | Rate | Age | Rate | |
|---|---|---|---|---|
| 60 | 5.7% | 80 | 8.0% | |
| 65 | 6.0% | 85 | 9.5% | |
| 70 | 6.5% | 90+ | 11.3% | |
| 75 | 7.1% |
Charitable Remainder Annuity Trusts.
Charitable remainder annuity trusts pay you a fixed rate of return for life or for a fixed time period. You have some flexibility in setting the rate of return. The taxation of the income you receive depends on the type of investments held by the trust.
Variable-Income Arrangements
Charitable Remainder Unitrusts. Charitable remainder unitrusts offer considerable flexibility. Your gift is held by a trustee, who converts the gifted property tax-free into a diversified mix of fixed-income and equity investments. Trust earnings grow free of tax. Depending on your objectives, you can, to a considerable extent, guide the mix of investments and the amount and timing of income paid to you. The amount of income you receive each year generally will be affected by the investment performance of the trust. The income paid to you will be taxed to you in accordance with the type of income earned by the trust, e.g., ordinary income, capital gain, or tax-free income. At the end of the term of the trust, the University receives the assets remaining in the trust.
Retirement Income
Deferred gift annuities and charitable remainder unitrusts can serve as supplements to your retirement plans. For example, you can make contributions over time under a deferred charitable gift annuity arrangement, with the University's payments to you deferred until a date you select, for example, your 65th birthday.
Lead Trusts
In a number of circumstances, donors who have sufficient income may find a "lead" trust an attractive way to make a delayed transfer of assets to children, grandchildren, or other beneficiaries, with very favorable tax consequences. A lead trust works as follows: You contribute cash or property to a trust. Willamette receives income from the trust for a designated term, typically either for your life or for a specified number of years. At the end of the term of the trust, the trust assets are distributed to your named beneficiaries. When interest rates are low -- as they are now -- the applicable tax rules are especially favorable and permit a large portion (sometimes 100%) of the assets to be transferred to your beneficiaries free from gift and estate tax. A lead trust also helps reduce the special taxes that apply to large gifts or bequests to grandchildren.
Trustees
Willamette University typically serves as trustee of charitable remainder trusts and lead trusts. As trustee, the University employs professional investment managers to help select appropriate trust investments. You may, however, choose another organization or individual to serve as trustee.
Please contact the Office of Gift Planning at (503) 370-6022 for more information about life-income arrangements that are best suited for your objectives.
The discussion above is general in nature and may not apply to all individuals. Prospective donors are urged to consult their individual tax and financial advisors concerning the specific consequences of making gifts to the University.